‘White Paper’ on Black Deeds: Finance Ministry charts UPA’s economic mismanagement & NDA’s achievements

Finance Minister Nirmala Sitharaman presented a comprehensive ‘White Paper’ on economic mismanagement by the United Progressive Alliance (UPA) government in the Lok Sabha on Thursday (February 8). This strategic move aims to settle the long-standing debate on the nation’s economic trajectory, offering a comparative analysis between the UPA’s tenure and the ten years of the Modi government.

The document serves the dual purpose of providing a historical perspective on the economic challenges faced by India and setting the stage for the upcoming Lok Sabha elections. The ‘White Paper’ aims to offer clarity on the economic conditions when the UPA government left office and the subsequent efforts made by the incumbent government to drive a turnaround.

The White Paper, presented in both English and Hindi languages, meticulously outlines the failures of the UPA government, juxtaposed with the corrective measures undertaken by the National Democratic Alliance (NDA) government. The document addresses various facets of the macroeconomic situation during the UPA years, emphasising issues such as double-digit inflation, ailing banking sectors due to excessive lending, and high policy uncertainty that impacted India’s business climate and eroded public confidence in the future.

Finance Minister Sitharaman highlighted the mismanagement and short-sighted handling of public finances during FY04-FY14 under the UPA government. The White Paper pointed out numerous scams leading to colossal revenue losses, escalating fiscal and revenue deficits, and the challenging task of rebuilding the economy’s foundations when the Modi government assumed power in 2014.

Tabling the interim budget 2024-25 in Parliament, Sitharaman said that the Modi government, which assumed office in 2014, overcame crisis of those years and the economy has been put firmly on a high sustainable growth path.

“In 2014 when our Government assumed the reins, the responsibility to mend the economy step by step and to put the governance systems in order was enormous. The need of the hour was to give hope to the people, to attract investments, and to build support for the much-needed reforms. The government did that successfully following our strong belief of ‘nation-first’,” she said.

“The crisis of those years has been overcome, and the economy has been put firmly on a high sustainable growth path with all-round development.”

She announced that the government will lay a White Paper on the table of the House “to look at where we were then till 2014 and where we are now, only to draw lessons from the mismanagement of those years.”.

“The exemplary track record of governance, development and performance, effective delivery, and ‘Jan Kalyan’ has given the government trust, confidence, and blessings of the people to realise, whatever it takes, the goal of ‘Viksit Bharat’ with good intentions, true dedication and hard work in the coming years and decades,” she said.

Purpose of the ‘White Paper’

BJP leader and Chairman of the Standing Committee on Finance, Jayant Sinha, underscored the importance of the government’s ‘White Paper,’ intending to shed light on the country’s “poor economic condition” when the UPA left power. Sinha emphasised how the current government’s policies and initiatives brought about a significant economic transformation, addressing deficiencies in various sectors.

As the ‘White Paper’ takes centre stage, Parliamentary Affairs Minister Pralhad Joshi announced the extension of the ongoing Budget session of Parliament until February 10 (Saturday).

Objectives of the “White Paper”

First, it seeks to apprise the Members of the Parliament and the people of India, of the nature and extent of governance, and economic and fiscal crises that were bequeathed on this government when it assumed office in 2014.

Second, it informs the Members of the Parliament and the public about the policies and measures that our government took to restore the health of the economy and make it vigorous and capable of fulfilling the growth aspirations of the people in the present and in the Amrit Kaal.

Third, in doing so, it hopes to generate a wider, more informed debate on the paramountcy of national interest and fiscal responsibility in matters of governance over political expediency.

Fourth, “to commit ourselves to national development, with new inspirations, new consciousness, new resolutions, as the country opens up immense possibilities and opportunities.”

Problems highlighted in the “White Paper”

The paper mentions that the UPA Government assumed power inheriting a robust economy poised for further reforms, yet during its ten-year tenure, it allowed the economy to stagnate. Ironically, despite often claiming credit for the transformative reforms of 1991, the UPA leadership abandoned these principles upon assuming office in 2004.

It adds, in a bid to sustain high economic growth following the global financial crisis of 2008, the UPA government compromised key macroeconomic fundamentals.

Notably, price stability, a cornerstone of economic stability, was severely compromised under its watch. The banking sector, too, bore the brunt of mismanagement, culminating in a significant crisis by the time the government’s term ended in 2014.

This crisis, characterised by a staggering amount of funds at risk, exacerbated India’s external vulnerability, largely due to an overreliance on external commercial borrowings (ECB). The introduction of measures such as the Foreign Currency Non-Resident (FCNR(B)) deposit window for Non-Resident Indians (NRIs) was emblematic of desperate attempts to bolster foreign exchange reserves amid a looming crisis reminiscent of the Balance of Payments turmoil of 1991, when India had to seek assistance from the International Monetary Fund (IMF).

Mismanagement of Public finances by UPA  

The paper highlights, the UPA Government’s handling of the 2008 Global Financial Crisis, which is characterised by the implementation of a fiscal stimulus package to counteract its ramifications, ultimately exacerbated the economic challenges it aimed to alleviate. During its tenure, the UPA administration allowed public finances to deteriorate significantly, pushing the economy perilously close to fiscal instability. Rampant fiscal deficits became a hallmark of its governance, pushing the economy to the brink of a fiscal precipice. Despite initial projections, the government’s fiscal deficit ballooned beyond expectations, forcing it to borrow substantially more from the market than initially budgeted for in the fiscal year 2011-12.

About the borrowings made by the UPA, the Paper highlights, in the pretext of responding to the impact of the global financial and economic crisis (while arguing, at the same time, that India was not affected by the crisis), the UPA government expanded its borrowing and did not relent at all. As per RBI, “the size of the government’s net market borrowing programme (dated securities) increased nearly 9.7 times in eight years to Rs 4.9 trillion in 2012-13. In addition, the government resorted to additional funding of Rs 1.16 trillion through 364-day treasury bills)”

It added that not only did the UPA Government borrow heavily from the market, but the funds raised were applied reproductively. The conspicuous neglect of infrastructure creation and challenges of the logistical
constraints caused industrial and economic growth to stumble. The Reserve Bank’s reports also pointed towards excessive revenue expenditure by the UPA government. Poor policy planning and execution also resulted in large unspent funds for many social sector schemes during the UPA years. The government’s prioritisation of unproductive spending meant that significant funds were allocated towards consumption rather than productive investment. Such was the lack of consideration for long-term national development that even the critical issue of defence preparedness was hampered by policy paralysis.

Wastage of Public resources mentioned in the “White Paper”

The tenure of the UPA government was marred by a series of policy failures and corruption scandals that left a lasting impact on the nation. From opaque auctions of public resources like coal and telecom spectrum to the spectre of retrospective taxation and unsustainable demand stimulus, the government’s actions were fraught with controversy.

The coal scam, which came to light in 2014, exposed the arbitrary allocation of coal blocks without adhering to transparent procedures. Additionally, the UPA government’s legacy includes the largest power outage in Indian history, plunging 62 crore people into darkness in July 2012 and jeopardising national security.

The telecom sector suffered greatly due to the 2G scam and policy paralysis, resulting in a lost decade of progress. The allocation of spectrum under the UPA regime lacked transparency and integrity, paving the way for the infamous “2G scam” and subsequent sectoral distress. Furthermore, schemes like the 80:20 gold export-import scheme illustrate how government systems were manipulated to benefit specific interests at the expense of the public trust.

Lost opportunities under UPA 

The paper mentions that, the tenure of the UPA government is often characterised as a lost decade, marked by missed opportunities to leverage the strong foundational economy and pace of reforms initiated by the Vajpayee government. Despite the potential for compounding growth, this opportunity was squandered, leading to stagnation. The government failed to seize opportunities for technology-driven innovation, efficiency, and sustainable growth, further impeding progress.

The Economic Survey of 2012-13 highlights the root causes of India’s economic slowdown during this period. While external factors played a role, domestic issues such as a post-financial crisis stimulus resulting in heightened inflation, coupled with supply-side constraints, contributed significantly. Monetary policy tightening amidst growing external headwinds further exacerbated the economic slowdown, affecting all sectors of the economy.

Moreover, the period was rife with corruption scandals, further tarnishing the government’s reputation. From the Coal Scam to the Commonwealth Games, 2G Telecom, and numerous other instances of corruption including Saradha Chit Fund, INX Media Case, and the Augusta Westland Helicopter Scam, public trust eroded as corruption scandals unfolded across various sectors. These scandals underscored the systemic failures and governance lapses during the UPA government’s tenure, contributing to the perception of a lost decade.

UPA v/s NDA

When the NDA government assumed power in 2014, the Indian economy was grappling with severe challenges, verging on crisis. Tasked with rectifying a decade of economic mismanagement, the current government embarked on a mission to restore the country’s economic fundamentals to a state of robust health.

At the outset, India was among the ‘fragile five’ economies, but through concerted efforts, we have ascended to become one of the ‘top five’ economies globally, consistently making significant contributions to global growth annually. Under NDA the newfound economic stability and growth prospects have instilled confidence in India’s potential and dynamism, inspiring hope both domestically and internationally.

The transformation is evident across various sectors. From successfully hosting the G20 Presidency in 2023, showcasing India’s competence on a global stage, to achieving widespread access to 4G coverage at affordable rates and pioneering the rapid rollout of 5G technology, the government have demonstrated unparalleled progress. Moreover, the implemit has entered transparent systems for resource auctions, fostering economic growth while ensuring accountability.

Addressing past challenges, such as the ‘twin balance sheet problem’ and double-digit inflation, the government have now positioned the economy with a ‘twin balance sheet advantage,’ fostering opportunities for increased investments, credit availability, and employment generation. Additionally, record-breaking foreign exchange reserves, infrastructural development prioritisation, and comprehensive coverage of development programs underscore our commitment to holistic progress and inclusive growth.

In essence, the strides made over the past decade have surmounted the stagnation and inefficiencies of the previous administration. As the government looks ahead to 2024, a sense of confidence and purpose has supplanted the uncertainties and indecision of 2014, driving India towards a brighter future.

A Journey From Fragile-Five to Top-Five in a decade 

Since assuming power in 2014, the NDA government has implemented numerous structural reforms that have bolstered the Indian economy’s macroeconomic foundations. These reforms have propelled India’s transition from the group of ‘Fragile Five’ nations to the ‘Top Five’ within just a decade, showcasing a remarkable resilience amidst global challenges. Despite external hurdles like the pandemic and geopolitical tensions, India’s economic ascent is evident in its GDP ranking trajectory. From ranking 10th in 2014, India has climbed the ranks to become the fifth largest economy in 2023, with projections indicating a leap to the third position by 2027, according to the IMF.

Over the past decade, the government has revitalised the stagnant financial sector and restructured the credit ecosystem, leading to substantial improvements. The overarching vision of “Nation First” has revolutionized India’s infrastructure and logistics framework, crucial for attracting investments and integrating into global value chains.

Upon assuming office in FY15, the pace of national highway construction was a mere 12 km/day. Under the NDA government’s stewardship, this rate has surged more than 2.3 times to 28 km/day by FY23. Moreover, the government has prioritised the procurement of critical equipment for the defence sector, essential for national security, a facet neglected by the previous UPA administration.

Opposition’s Response to the “White Paper”

Leaders of the opposition parties shared mixed reactions to the government’s ‘White Paper.’ Leader of Congress in Lok Sabha, Adhir Ranjan Chowdhury, expressed no objection to the document but raised concerns about issues such as the escape of economic offender Mehul Choksi and bank lootings. RJD MP Manoj Jha deemed the ‘White Paper’ as a potential “white elephant” and criticised the government’s performance incentives.

DMK MP Dayanidhi Maran questioned the effectiveness of the ‘White Paper,’ claiming that the Finance Minister’s praises took time but delivery was lacking. He asserted that people are already disappointed, and the budget did not bring substantial change.

The ‘White Paper’ presented by Finance Minister Nirmala Sitharaman serves as a comprehensive review of India’s economic journey, offering insights into the challenges faced during the UPA era and the subsequent measures taken for economic revival under the Modi government. As political debates intensify in the run-up to the Lok Sabha elections, the ‘White Paper’ becomes a crucial tool in shaping public perceptions of economic governance.